SBTi Aims to Set Standards for Financial Institutions to Assess Net-Zero Goals
The international body facilitating financial institutions to set emissions reduction targets in agreement with climate science, the Science Based Targets initiative (SBTi), announced the publication of a "Net-Zero Foundations for Financial Institutions" paper to help institutions such as banks, asset owners, asset managers, and other financial institutions set net-zero goals.
The paper addresses issues such as defining net-zero and fossil fuel phase-out. It provides new concepts for defining and setting net-zero targets and complements the SBTi's Corporate Net-Zero Standard, launched in October 2021.
Although these institutions have committed to reaching net-zero emissions before 2050, they require a science-based approach to set emissions reduction targets in line with the Paris Agreement and 1.5°C.
Dr Luiz Fernando do Amaral, SBTi Chief Executive Officer (CEO), said: "Financial institutions are critical players in driving real-economy emissions reductions through investments and lending activities. There are signs the sector is embracing this responsibility. Immediate action is already possible for short term science-based targets. However, when it comes to net-zero, there is little understanding of what it means for the finance industry. Our paper provides the clarity that has been desperately needed and will enable us to develop a Net-Zero Standard for Financial Institutions that will help net-zero pledges deliver science-based action.”
The SBTi has plans to devise Net-Zero Standards for Financial Institutions through road-testing of methodologies, multi-stakeholder consultations and a rigorous technical review with a Financial Net-Zero Expert Advisory Group (EAG) in the next year.
Only 19 financial institutions with approved science-based targets are currently in line with 1.5°C. They are Schroders, La Banque Postale, KB Financial Group and EQT. As of now, more than 50 financial institutions have committed to setting net-zero targets, and over 140 institutions vowed near-term targets.
Alberto Carrillo Pineda, Managing Director and Co-Founder of the SBTi, said: "Having launched the world’s first framework for corporate net-zero target setting in line with climate science last year, the SBTi recognizes the need to create a similar standard that leverages the unique role financial institutions play in global emissions reductions. More than 900 companies are already committed to setting science-based net-zero targets. The SBTi's Net-Zero Standard for Financial Institutions will bring clarity to this space and ensure that the growth momentum in the financial sector translates into science-based decarbonization in the real economy."
